The COVID-19 pandemic has led to unprecedented economic support measures from governments across Europe. With this, the crisis has provided an occasion for a significant demonstration of the ability of states to implement policies and deliver services. This could create expectations among electorates of permanent changes to the macroeconomic regime, towards one characterised by a more protective state and a rebalancing between the state and the market. Significant political barriers to such a shift remain. The article argues that, in contrast to the aftermath of the two previous economic crises in Europe, many new ideas are floating around and support for a more protective state is emerging across the political spectrum. The current crisis might thus represent a turning point.

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- To understand contemporary challenges to European democracy, it is crucial to look beyond the surface of politics and consider the deeper relationship between democracy and the economy. Instead of focusing exclusively on the rise of ‘populism’, it is necessary to acknowledge the multiplicity of threats to European democracy, in particular those arising from the structure of European economies and economic policymaking. - Understanding these weaknesses in the functioning of European democracies is crucial to an effective approach to future economic transformations, in particular the green transition, but also for dealing effectively and equitably with challenges such as higher inflation. It is important that the relevant policy changes and responses are democratically legitimate and do not foster the kind of political backlash that previous economic transformations did. - Over the past 40 years, economic inequality – ranging from income inequality to discrepancies in wealth and economic security – has widened throughout developed economies. In turn, these developments have generated increasing political inequality, as economic policymaking has served the interests of the well-off. - Democratic systems have also been made less responsive to electorates through the ‘depoliticization’ of policymaking, in particular economic policy, as a result of its insulation from national-level democratic scrutiny. The expansion of technocratic modes of governance – notably through independent central banks and EU-level institutions – has in many cases entrenched the policy preferences of specific groups in institutions removed from direct democratic control. - As this depoliticization has to a large extent made democratic contestation over economic policy redundant, politics has increasingly been polarized around ‘cultural’ questions. But such a focus on culture is unlikely to address the inequalities behind the dysfunction of democracies in Europe. - Strengthening European democracy requires a ‘repoliticization’ of economic policymaking, including both fiscal and monetary policymaking. In the specific context of the EU, this would mean opening up more policy space for national decision-makers and parliaments – in particular by giving them a more influential role in fiscal policy, and by making monetary policy more democratic.

There is increasing impetus for stronger cooperation between the US, EU and UK on digital technology governance. Drivers of this trend include the economic incentives arising from opportunities for digital trade; the ambition for digital technology governance to be underpinned by shared values, including support for a democratic, open and global internet; and the need to respond to geopolitical competition, especially from China. — Two specific areas of governance in which there is concrete potential to collaborate, and in which policymakers have indicated significant ambitions to do so, are digital trade and digital technical standards. — To leverage strategic opportunities for digital trade, the US, EU and UK need to continue identifying and promoting principles based on shared values and agendas, and demonstrate joint leadership at the global level,including in the World Trade Organization (WTO) on e-commerce. — Policy actors in the US, EU and UK should work individually and collectively to build on the latest generation of digital trade agreements. This will help to promote closer alignment on digital rules and standards, and support the establishment of more up-to-date models for innovation and governance. — Collaborating on digital technical standards, particularly those underlying internet governance and emerging technologies, offers the US, EU and UK strategic opportunities to build a vision of digital technology governance rooted in multi-stakeholder participation and democratic values. This can provide a strong alternative to standards proposals such as China’s ‘New IP’ system. — Policy actors should seek to expand strategic cooperation on standards development among the US, EU and UK, among like-minded countries, and among states that are undecided on the direction of their technology governance, including in the Global South. They should also take practical steps to incorporate the views and expertise of the technology industry, the broader private sector, academia and civil society. — By promoting best-practice governance models that are anticipatory, dynamic and flexible, transatlantic efforts for cooperation on digital regulation can better account for the rapid pace of technological change. Early evidence of this more forward-looking approach is emerging through the EU’s proposed regulation of digital services and artificial intelligence (AI), and in the UK’s proposed legislation to tackle online harms. — The recently launched EU-US Trade and Technology Council is a particularly valuable platform for strengthening cooperation in this arena. But transatlantic efforts to promote a model of digital governance predicated on democratic values would stand an even greater chance of success if the council’s work were more connected to efforts by the UK and other leading democracies.